David Prosser: Reform the tax system and deliver a decent pension for all
Saturday 05 March 2005
Devastating new research from Datamonitor could be the final nail in the coffin for the Government's ailing pensions policy.
Devastating new research from Datamonitor could be the final nail in the coffin for the Government's ailing pensions policy. The market analyst says stakeholder pensions, launched four years ago as the solution to the country's savings crisis, have comprehensively failed.
After a strong start in the year the Government launched stakeholder pensions, sales have fallen dramatically. The number of plans sold dropped by 6 per cent a year between 2002 and the end of last year. During a period when financial experts have repeatedly warned that people are not saving enough for old age, sales of the Government's flagship pension product have collapsed.
We shouldn't be surprised by this disaster. Stakeholder plans appealed to savers who were already contributing to pensions, because they were a low-cost version of older products. But they did nothing to address the fundamental reasons why people aren't saving enough.
One problem is that many people just do not have enough spare cash to save for the future. This group includes many younger workers, who are often earning low salaries or struggling to repay student loans. Women are also over-represented in the "can't afford to save" category.
There is an even larger group of people who can only afford to put by relatively small sums. These savers face another huge problem: the ridiculous complexity of pensions, especially the interaction between the state and private-sector systems.
Currently, the state pension rules mean modest savers lose out. While poorer pensioners are entitled to claim the means-tested pension credit, by saving for old age, they disqualify themselves from this cash. So, unless you're confident of comfortably putting by more than you would get from the pension credit, you might as well not bother.
Without reform of the state system, there is little hope of any improvement in private pension saving. It's therefore encouraging that Tony Blair this week backed the idea of an automatic state pension paid to everyone over a certain age - pensioners would qualify through a basic residency test, irrespective of the National Insurance contributions they had made. Less happily, he quickly pointed out that a universal pension would cost several billion pounds more than the current set-up. He warned the cost could be prohibitive.
There is one obvious way to pay for more generous state pensions. The tax reliefs available to savers who pay into private pensions cost the Treasury a staggering £19 billion a year. The money is meant to be an incentive to save, yet the vast majority of those who contribute to private pensions would be providing for their old age even without these tax breaks. Perversely, higher-rate taxpayers - who need the least help to save - get the most generous tax breaks.
There is nothing to stop us reallocating some of the cash currently being wasted on pension tax relief. It could be used to underpin a universal pension generous enough to enable us to do away with means-tested benefits for pensioners.
The transformation would be remarkable. Everyone could look forward to a decent basic income in old age - including those who can't afford to save for a pension. Those who could afford to put by extra would do even better, free from anxiety about losing access to complicated means-tested benefits.
* Car dealers' reputation as sharks may not be entirely deserved, but there's no doubt that they charge way over the odds for finance. Yet two-fifths of car-buyers still take the loan on offer at the showroom.
Analyst MoneySupermarket cites the cost of buying a Ford Mondeo. Drive away with Ford's own finance package, costing 15.1 per cent a year, and your new wheelscost £22,500. Buy with a cheap personal loan, at about 6 per cent, and you pay £20,200, saving more than £2,000.
Car-buyers think long and hard about a new vehicle, but then sign up in an instant when they're offered an expensive finance package. If you plan to buy a new motor, now that March's 05 plates are available, sort out a cheap loan before you set off for a test drive.
Do your homework to beat the banks
Britain's biggest banks have been quick to point out that a large chunk of their mammoth profits is made outside of this country. Of HSBC's £9.2bn profit unveiled on Monday, for example, only £2.6bn was generated here.
Even so, there's no getting away from the fact that the banks are doing very nicely out of us all. But while it's right to get cross when this exploitation is exposed, we often have only ourselves to blame.
For example, despite a two-year campaign from Which? to persuade people to switch current account, the biggest banks retain 70 per cent of the market. Similarly, Barclaycard remains dominant in the credit card sector, despite rarely offering the best deal. Too many of us automatically troop down to our local big bank, whatever our financial need.
Maybe a lack of financial savvy is to blame. On-line bank Egg has been testing the nation's financial IQ with relatively simple questions about interest rates and inflation. The average Briton scores a pretty dismal 56, out of a possible 120.
You can sit the test for yourself online at www.financial-iq.co.uk. Use the results to identify your weak spots and then do some homework.
It's your only option. The big banks may not enjoy being criticised for profiteering, but they won't be shamed into action.
The only effective way to force them to offer a better deal is to take your business elsewhere. And that means knowing how to work out when you are being ripped off.
The best deals on personal loans: Peer-to-peer providers are more competitive for smaller sums
China stock collapse: Five things you need to know about 'Black Monday'
Questions of Cash: 'Our dividends seem to have disappeared when TSB was bought and then born again'
Mark Dampier: 'Masterly inactivity - the case for sticking with smaller firms'
My Tinder date asked for a refund when I declined a second meet up
- 1 VMAs 2015: Was Nicki Minaj and Miley Cyrus' awkward acceptance put-down real or staged?
- 2 If you're not already angry about the migrant crisis, here's a history lesson to remind you why you really should be
- 3 Rules on 5p plastic bags likely to lead to arguments at the check-out
- 4 Chaos breaks out in courtroom as father attacks killer of three-year-old daughter
- 5 I like Corbyn, but let's face it: we don't need another white man at the head of a political party
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
Black holes are a passage to another universe, says Stephen Hawking
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...
Day In a Page
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.